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Coal Power Plants in China
Ajay Mathur
Energy-Environment Technology Division
Tata Energy Research Institute
New Delhi - 110 003, India
Keywords: CCT, financing, low NOx burners, China
Summary
A recent example of innovative financing of a clean coal technology (CCT) in
a developing country is the Huaneng Power Project in China. In this case, the
CCT manufacturer worked proactively together with export credit agencies (ECAs)
and commercial banks to arrange financing, for the benefit of all stakeholders.
In this example, the ECAs' contributions were a vital catalyst for the sourcing
of funds for the utility to develop its power stations. This highlights the
importance of ECAs, and the need for manufacturers to be proactive in arranging
finance.
Background
In 1997, Huaneng Power International Inc. (HPI), a Chinese utility and a subsidiary
of the Ministry of Electric Power (MOEP), financed three new power stations
from funds raised by share issues on the international stock markets and by
using export credit finance for the procurement of western equipment. From the
CCT manufacturer's perspective, the transaction was a typical sale to an 'on
balance sheet' purchase by a utility company in a foreign market. Because of
the country risk for this market, the CCT manufacturer and the commercial banks
required the involvement of ECAs.
Approach
HPI had a charter from MOEP to procure first-class boiler and turbine equipment
from western suppliers. HPI financed its power station development from funds
raised by share issues on the international stock markets and by using export
credit finance for the procurement of western equipment. The share issues resulted
in 25% of the company being owned by international investors. Three new power
700MW power stations were built at Dandong, Dalian and Fuzhou. The western equipment
was supplied by Mitsui Babcock Energy Limited (MBEL), Westinghouse and Siemens.
MBEL supplied the boiler equipment and Westinghouse and Siemens supplied the
steam turbine equipment. The boilers are fitted with 24 low-NOx burners, a CCT
at the commercially available stage. These burners are rated at 51.6 MWth, and
NOx is guaranteed at 300ppm (6% O2 dry) over a range of coals.
To finance the western power station equipment buyer credit facilities were arranged by the manufacturers. To achieve this, the manufacturers approached commercial banks and ECAs. The buyer credit was in the form of commercial bank loans for HPI, provided by a consortium of banks. Société Generale and Barclays Bank plc led the lending group of five major banks in these contracts. To enable these commercial banks to make these loans available, export credit backing was required. This was arranged with the ECAs from the manufacturers' countries: ECGD from the UK and EXIM bank from the USA. ECGD acted as loan guarantor to Barclays, and Société Generale and EXIM bank provided loans.
The export credit financing for the western equipment can be summarised as follows:
| ECG | EXIM | |
| Dandong | 81 million US$ | 158 million US$ |
| Dalian | 84 million US$ | 184 million US$ |
| Fuzhou | 92 million US$ | 47 million US$ |
In addition, for the Fuzhou project, KfW, a German ECA, supported Siemens in turbine financing.
Impacts
The low-NOx burners are designed to fire a range of high ash, high volatile
coals. There are also wide-scale plans to retrofit existing boilers with low-NOx
burners. There is a reduction of over 60% in NOx emission levels compared to
conventional burners. Emissions of NOx can typically be reduced from 430-450
g/GJ to 170 g/GJ.
Lessons Learned
This example illustrates typical 'on balance sheet' financing for a CCT and
demonstrates the importance of ECAs in export credit financing. The need for
manufacturers to be proactive in arranging finance is clearly demonstrated.
Bibliography
IEA/OECD, 1999: Cleaner Coal Technologies-Financing. Brochure prepared by ETSU
for the UK Department of Trade and Industry on behalf of the IEA Committee on
Energy Research and Technology.
Contact
Roshan Kamall
Location 1124
Department of Trade and Industry
1 Victoria Street
London SW 1H 0ET
Fax. 0171 8287969
email: roshan.kamal@hend.dti.gov.uk
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